Finance Minister Michael Noonan has said he is "very pleased" with the latest economic forecast from the Central Bank.
In its Quarterly Bulletin, the bank said the Irish economy will grow by an average of 1% in 2011 - driven by exports.
However, its revised downwards its outlook for 2012.
The Central Bank is also advising the Government to reduce the Exchequer deficit to below the target of 8.6% next year.
Tax hikes and spending cuts of between at least €3.6bn and €4bn will be unveiled in December.
But speaking in Luxemburg, Minister Noonan said that Department of Finance would have to make its own projections and this would be crucial to the budget preparations.
Mr Noonan said: "I was expecting, with the decline in the economies of our customer countries to which we export, that there would be a more significant mark down.
"The Deprtment of Finance will have to form their own independent opinion, through their own forecasting unit, as to where we pitch the estimate for next year. That will be a crucial factor in the preparation of the Budget."